Hibiscus hopeful OPEC’s supply cut will boost prices

US$30 would be the lowest limit the company would still be comfortable with


Hibiscus Petroleum Bhd expects the decision by OPEC to cut oil supply will be supportive of prices trading higher and placing industry players in a more comfortable state.

Chairman Zainul Rahim Mohd Zain (picture) said it will be positive for the industry and companies like Hibiscus, should OPEC decide to cut oil production, but the effect on oil price may not be seen immediately.

“There is no guarantee the oil price will jump overnight. It could still be in the high US$50 (RM207) or low US$60,” he told the press at the company’s AGM in Petaling Jaya yesterday.

He added that the industry is jittery over oil price below US$60 per barrel as prices could easily slide to below US$40 on bearish factors.

OPEC countries, which contribute some 30% to 40% of the world’s crude oil, are scheduled to meet tomorrow at its headquarters in Vienna, Austria, to agree on a joint output policy with non-OPEC production giant Russia.

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali is attending the bi-annual meeting to seek understanding whether Malaysia shall continue cutting output by 20,000 barrels a day, as the country has “informal” obligations despite not being a member of the cartel. 

Zainul Rahim said Hibiscus may need to take aggressive cost- saving measures if prices drop below US$40. He said US$30 would be the lowest limit the company would still be comfortable with.

MD Dr Kenneth Pereira said the group does all its investment appraisals at an oil price base figure of US$50 to US$55.The Brent contract last traded at US$63 a barrel yesterday. 

Pereira said Hibiscus has deferred the development of its assets in Australia in view of a higher unit production cost against current price level.

The company is likely to allocate some US$30 million in capital expenditure for its Anasuria asset, and RM70 million has been designated for the development of its North Sabah asset.

Pereira said the average cost per barrel for Anasuria is US$20 and US$15 for North Sabah, and double of that for its Australian assets.

Hibiscus aims to achieve a 5,000 barrels per day (bpd) output at the Anasuria Cluster by the end of financial year 2020 (FY20).

Hibiscus now produces about 9,000 bpd and the figure is expected to reach between 10,000 bpd and 12,000 bpd by 2020.

The group intends to deliver a total oil production of 2.7-3 million bpd in FY19.

As at Sept 30, 2018, Hibiscus’ cash balances stood at RM302 million, total assets at RM2.2 billion and zero debt.

Pereira did not rule out the possibility of debt or equity fundraising in the near future for asset development expenditure.